When competing internationally, strategy making is more complex for five reasons:

(1) different countries have home-country advantages in different industries;

(2) there exists location-based advantages to performing different value chain activities in different parts of the world;

(3) varying political and economic risks make the business climate of some countries more favorable than others;

(4) companies face the risk of adverse shifts in exchange rates when operating in foreign countries;

and (5) differences in buyer tastes and preferences present a conundrum concerning the trade-off between customizing and standardizing products and services.

A company must choose among three alternative approaches for competing internationally: (1) a multidomestic strategy or "think-local, act-local" approach to crafting international strategy; (2) a global strategya "think-global, act-global" approach; and (3) a combination of "think-global, act-local" approach, known as a transnational strategy. A think-local, act-local or multidomestic strategy is appropriate for industries or companies that must vary their product offerings and competitive approaches from country to country to accommodate different buyer preferences and market conditions. The think-global, act-global approach (or global strategy) works best when there are substantial cost benefits to be gained from taking a standardized and globally integrated approach and little need for local responsiveness.

A transnational approach ("think global, act local") is called for when there is a high need for local responsiveness as well as substantial benefits from taking a globally integrated approach. In this approach, a company strives to employ the same basic competitive strategy in all markets but still customize its product offering and some aspect of its operations to fit local market circumstances. The goal of this exercise is for you to understand how and why differing market conditions across countries influence a companys strategy choices in international markets and the three main strategic approaches for competing internationally.

If your companys product is dry soup mixes and canned soups, would a multidomestic strategy, a transnational strategy, or a global strategy seem to be more advisable?

Multiple Choice, Pick One:

A multidomestic as local market conditions preclude a uniform, coordinated worldwide strategic approach.

A transnational approach is appropriate. Country-to-country customization to accommodate differences in taste preferences is necessary. A transnational strategy since processed food companies compete in two or more countries simultaneously.

A multidomestic strategy since customer needs and preferences vary greatly in the soup industry.

A global strategy since local managers need little latitude in decision-making.